State Bank of India, the biggest lender to grounded Kingfisher Airlines Ltd. (KAIR), said it will seize collateral pledged by the company after the carrier’s Chairman Vijay Mallya filed a lawsuit to stop the creditors.
Mallya on March 26 filed a case against State Bank, the nation’s biggest lender, and 17 other creditors, according to a filing on the Bombay High Court’s website. The court today declined to stop banks from selling shares of United Spirits (UNSP) Ltd. that have been pledged as collateral, Bloomberg TV India reported.
The liquor baron offered shares of United Spirits and Mangalore Chemicals & Fertilizers Ltd. (MCF), his luxury villa in the beach resort of Goa as well as the Kingfisher brand as collateral for loans raised to expand his airline. Kingfisher, the only Indian carrier to order Airbus SAS A380s, has halted flights since October after struggling with a 86 billion-rupee ($1.6 billion) debt pile and five years of losses.
“The bank has called up the loan and has asked the company to repay,” State Bank Chairman Pratip Chaudhuri said in an interview in Mumbai today. “We will invoke all the guarantees and securities that we hold including shares of United Spirits that is pledged as collateral and personal assets of the people who have given the guarantee.”
Kingfisher, named after Mallya’s beer brand, rose 3.6 percent to 8.70 rupees in Mumbai. United Spirits dropped 1.6 percent to 1,859.7 rupees, while State Bank of India (SBIN) gained 2.4 percent.
A luxury villa in the western Indian state of Goa, two helicopters, a building in Mumbai and shares have been used as collateral for loans as of November 2011, Namo Narain Meena, junior finance minister, said that month. The total value of the guarantees, including furniture and fixtures worth 3.3 billion rupees ($61 million), was 52.4 billion rupees, he said.
Selling the shares of companies controlled by Mallya can help recover as much as 10 billion rupees, Chaudhuri said in Mumbai on Feb 14.
The lender today sold shares of Mangalore Chemicals and 730,000 shares of United Spirits, Bloomberg TV India reported, citing an unidentified State Bank official. Zuari Fertilisers & Chemicals Ltd. bought 9.72 percent of Mangalore Chemicals today, according to an exchange filing.
Prakash Mirpuri, a spokesman for Kingfisher Airlines, didn’t immediately respond to a call and a text message to his mobile phone.
Mallya is also selling a stake in United Spirits to Diageo Plc (DGE) as he seeks funds to pare Kingfisher Air’s debt. Diageo in November agreed to pay 111.7 billion rupees to acquire a 53.4 percent holding in India’s biggest whiskey maker.
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